Reply to: Reconsider the new Dividend Tax for small businesses - Gouvernment Petition

[d000hg]

There will be coalition of Labour with SNP in next Govt - for the good of the country to get rid of Tories. SNP tax policies (50% tax) were much milder compared to what Tories have already done.

No they weren't. Not for the majority.

I'm rather sick of the "I don't like X, I know I'll start a petition" mentality.

[jamesbrown]

The terms dont favour BTL owners, for a start the mortgages arent as good, higher int rates and lower LTV's. I agree there needs to be balance, what I think has skewed the argument is the number of foreign investors buying up vast numbers of London properties and creating a south east bubble. Personally I dont see anything wrong in having a few BTL's, hey my son or daughter might end up living in one I own.

The stupidity of it all though is that if you run BTL as a Ltd commercial enterprise none of the new rules apply. So it doesnt hit the people that own 50 or 100 running it as a business, it just hits the small man who is trying to plan for the future. Any who do own a vast number and are cash rich wont mind setting up an Ltd, paying the CGT and avoiding this all together.

For the vast number of contractors who earn above average wage can you suggest an alternative investment strategy? After all we dont live in a communist state so investing is ok. Gold is knackered, Pensions are at best poor performers at worst you lose it all, savings have shockingly bad returns and ISA's have a limit.

The MMR excluded BTL investors, so it isn't a level playing field. The problem is that, for every person with reasonable intentions (you, I dare say), there are five others that are speculating on a property bubble. In terms of financial stability, it makes far more sense for SMEs and larger corporates to be investing in BTL than retail investors. Retail investors are typically chasing a pension (i.e. several properties) or a quick turnaround on asset appreciation, which exaggerates the existing propensity for boom/bust in UK property. However, the irony of the current gov't policies is that, in the short-term, they may produce the herd departure from BTL that they're looking to avoid in the longer term.

Sure, there are millions of sensible investment strategies across a whole variety of asset classes that don't have the same social consequences as housing bubbles. Most retail BTL investors are woefully over-exposed to UK housing, given that they probably own their own house and have several others.

[smalldog]

Sure, that's superficially correct, but it's missing the point. Prices reflect supply vs. demand. Where you have a mountain of BTL speculators (on very favourable funding terms), there's excess demand. In other words, housing starts to behave like any other asset class and many of those that would otherwise buy are unable to do so. Essentially, there needs to be a level playing field in terms of funding (expect that soon from the FPC) and gov't needs to introduce policies that encourage long-term investment, rather than speculation, which generally implies less retail investment in BTL. I don't particularly like the way the gov't has approached this with the 3% residual stamp duty and the reduction in relief on mortgage interest, but a rebalancing is definitely needed.

The terms dont favour BTL owners, for a start the mortgages arent as good, higher int rates and lower LTV's. I agree there needs to be balance, what I think has skewed the argument is the number of foreign investors buying up vast numbers of London properties and creating a south east bubble. Personally I dont see anything wrong in having a few BTL's, hey my son or daughter might end up living in one I own.

The stupidity of it all though is that if you run BTL as a Ltd commercial enterprise none of the new rules apply. So it doesnt hit the people that own 50 or 100 running it as a business, it just hits the small man who is trying to plan for the future. Any who do own a vast number and are cash rich wont mind setting up an Ltd, paying the CGT and avoiding this all together.

For the vast number of contractors who earn above average wage can you suggest an alternative investment strategy? After all we dont live in a communist state so investing is ok. Gold is knackered, Pensions are at best poor performers at worst you lose it all, savings have shockingly bad returns and ISA's have a limit.

[garethevans1986]

Signed and Shared.

[jamesbrown]

it is lived in, just not by the owner, just playing devils advocate

Sure, that's superficially correct, but it's missing the point. Prices reflect supply vs. demand. Where you have a mountain of BTL speculators (on very favourable funding terms), there's excess demand. In other words, housing starts to behave like any other asset class and many of those that would otherwise buy are unable to do so. Essentially, there needs to be a level playing field in terms of funding (expect that soon from the FPC) and gov't needs to introduce policies that encourage long-term investment, rather than speculation, which generally implies less retail investment in BTL. I don't particularly like the way the gov't has approached this with the 3% residual stamp duty and the reduction in relief on mortgage interest, but a rebalancing is definitely needed.

[smalldog]

This isn't intended as a criticism, but part of the problem with property price inflation is that many people have viewed property as a pension/appreciating asset, when it should be viewed as a place to live. This is why valuations have become detached from reality with QE, for example, and why those who believe property is a "one way bet" because of immigration etc. are likely to be surprised when they find it acts like all other asset classes when sentiment changes. On the contrary, property should not be viewed as a pension in the same way as other asset classes because it has broader social consequences.

it is lived in, just not by the owner, just playing devils advocate

[jamesbrown]

In real terms I dont make that much from rent versus mortgages year on year, the universe has a nasty habit of hitting me with all sorts of costs just when I feel I may be getting into the black. Its all about capital growth which should give me slightly more than a poxy pension plan over the long term minus the eventual CGT when I cash in. Im not one of the handful of uber rich BTL landlords that apparently exist, its for me and my family when I retire. But on the basis of performance over the last decade that maybe an aspiration, they arent worth anymore than I paid for them and I hope to retire in ten years so i hope to make something in the next decade!..

This isn't intended as a criticism, but part of the problem with property price inflation is that many people have viewed property as a pension/appreciating asset, when it should be viewed as a place to live. This is why valuations have become detached from reality with QE, for example, and why those who believe property is a "one way bet" because of immigration etc. are likely to be surprised when they find it acts like all other asset classes when sentiment changes. On the contrary, property should not be viewed as a pension in the same way as other asset classes because it has broader social consequences.

[ASB]

Smalldog, thats a reasonable view. Though it is different than mine.

To me property is abount a reasonable income in perpetuity, and one that is reasonably inflation proofed. Capital values are fairly unimportant to me; save for it being a convenient and fairly cheap form of finance should I need it.

[smalldog]

BTL owners are the spawn of the devil and should be taxed out of existence it appears (though I'm keeping mine).

I have been trying, without success, to find longish terms yields statistics v risk free investment (i.e. deposit account rates) to see how they stack up.

I am far from convinced that there is any excess profits over the longer term.

My property yields approx 5%; and that is probably about what I have received overall over the entire time I have had rental property. For a lot of that time interest rates were considerably higher.

In real terms I dont make that much from rent versus mortgages year on year, the universe has a nasty habit of hitting me with all sorts of costs just when I feel I may be getting into the black. Its all about capital growth which should give me slightly more than a poxy pension plan over the long term minus the eventual CGT when I cash in. Im not one of the handful of uber rich BTL landlords that apparently exist, its for me and my family when I retire. But on the basis of performance over the last decade that maybe an aspiration, they arent worth anymore than I paid for them and I hope to retire in ten years so i hope to make something in the next decade!..

[ASB]

BTL owners are the spawn of the devil and should be taxed out of existence it appears (though I'm keeping mine).

I have been trying, without success, to find longish terms yields statistics v risk free investment (i.e. deposit account rates) to see how they stack up.

I am far from convinced that there is any excess profits over the longer term.

My property yields approx 5%; and that is probably about what I have received overall over the entire time I have had rental property. For a lot of that time interest rates were considerably higher.

[smalldog]

Im a BTL landlord and Im pushing up my rents to cover the additional tax burden and I wont be the only one. Im pushing it up to the tenants, I will be buggered if I am going to pay tax on a loss without any recoup. So Osborne will create a new crisis in private rent fees.

Im not over geared, I had losses this last year (total of 4k loss for the year) due to central heating systems needing to be replaced on the bulk of my 5 BTL's as they approach their tenth year anniversary. This new punitive tax is the only one in existence that will tax on a loss as it is based purely on turnover and not profit.

The BTL price bubble is very localised i.e. London. 3 of the BTL properties I own are in Sheffield and I can assure you there is no upward price movement pushing out first timers, in fact all 3 are worth now what I paid for them in 2005. BTL has created investment in these areas for businesses in not only their development but also the service sector that looks after these developments. It hasnt created an ever escalating price war.

My BTL portfolio of a meagre 5 properties is my pension, I dont pay into a private pension plan. No greed here just planning for the future, or at least I was.

[SueEllen]

Osborne wanted to simply the tax system, blamed Labour for creating very complex set of tax laws...

No he's got the evil smirk, Brown just looked blind...

[AtW]

Osborne wanted to simply the tax system, blamed Labour for creating very complex set of tax laws...

[handyandy]

On the general subject of second homes (which are also captured by the 3% SDLT that hits BTL) Sue Ellens point on married couples exposes a major anomaly in the tax on second homes. It not only hits on SDLT but on CGT when you come to sell (due to only being able to have one principle private residence).

Whilst I'm sure the majority of couples (married or not) live in just one home there are a lot of work related reasons to have two. It also goes against the principle of individual taxation (and ironically against the Conservative idea that marriage should be encouraged through the tax system).

The real anomaly is that if a married couple bought a house worth 900k then it would be free of both CGT and the extra 3% SDLT. If they bought a smaller one for 450k and then a second smaller one in a different part of the country for the same amount they would attract an extra 3% SDLT on the second transaction and be hit for CGT on any increase when it comes to sell.

What a perverse set of consequences!

[SueEllen]

To achieve that they need to require the Pope to approve every divorce settlement ...

Not in this country. It's the politicians who rule while pretending to be mostly Protestant.